<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For Three Month Period Ended September 30, 2000
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
Commission File Number: 000-22555
----------------
COINSTAR, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 94-3156448
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1800 114th Avenue SE, Bellevue, Washington 98004
(Address of principal executive offices) (Zip Code)
</TABLE>
(425) 943-8000
(Registrant's telephone number, including area code)
----------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [_]
----------------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
Class Outstanding at October 31, 2000
<S> <C>
Common Stock, $0.001 par value 20,317,188
</TABLE>
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<PAGE>
COINSTAR, INC. AND SUBSIDIARIES
FORM 10-Q
Index
<TABLE>
<C> <S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheets as of September 30, 2000
(unaudited), and December 31, 1999......................... Page 3
Consolidated Statements of Operations for the nine and
three month periods ended September 30, 2000 and 1999
(unaudited)................................................ Page 4
Consolidated Statement of Stockholders' Equity for the nine
month period ended September 30, 2000 (unaudited).......... Page 5
Consolidated Statements of Cash Flows for the nine month
periods ended September 30, 2000 and 1999 (unaudited)...... Page 6
Notes to Consolidated Financial Statements for the nine
month periods ended September 30, 2000 and 1999
(unaudited)................................................ Page 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................. Page 9
Item 3. Quantitative and Qualitative Disclosures About Market
Risk....................................................... Page 25
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K........................... Page 26
SIGNATURES........................................................... Page 27
EXHIBIT INDEX........................................................ Page 28
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
COINSTAR, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------- -------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents...................... $ 78,624,134 $ 78,736,908
Short-term investments available for sale...... -- 9,294,825
Prepaid expenses and other current assets...... 2,453,903 2,337,456
------------- -------------
Total current assets......................... 81,078,037 90,369,189
PROPERTY AND EQUIPMENT:
Coinstar units................................. 118,439,790 102,669,587
Computers...................................... 6,713,817 4,481,264
Office furniture and equipment................. 1,530,718 1,241,198
Leased vehicles................................ 3,493,856 2,825,155
Leasehold improvements......................... 477,911 437,593
Coinstar components............................ 67,224 94,473
------------- -------------
130,723,316 111,749,270
Accumulated depreciation....................... (60,476,045) (43,649,321)
------------- -------------
70,247,271 68,099,949
OTHER ASSETS..................................... 6,980,339 4,911,337
------------- -------------
TOTAL............................................ $ 158,305,647 $ 163,380,475
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable............................... $ 6,425,664 $ 4,866,539
Accrued liabilities............................ 43,831,113 41,417,592
Current portion of long-term debt and capital
lease obligations............................. 793,173 649,640
------------- -------------
Total current liabilities.................... 51,049,950 46,933,771
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS..... 61,378,556 61,181,184
------------- -------------
Total liabilities............................ 112,428,506 108,114,955
COMMITMENTS AND CONTINGENCIES (Note 2)
MINORITY INTEREST-CONVERTIBLE PREFERRED STOCK.... 4,501,964 --
STOCKHOLDERS' EQUITY:
Common stock................................... 159,144,204 157,737,504
Contributed capital for warrants and stock
options....................................... 1,316,128 1,316,128
Accumulated other comprehensive income (loss).. (15,134) (1,304)
Accumulated deficit............................ (119,070,021) (103,786,808)
------------- -------------
Total stockholders' equity..................... 41,375,177 55,265,520
------------- -------------
TOTAL............................................ $ 158,305,647 $ 163,380,475
============= =============
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
COINSTAR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Nine Month Periods Three Month Periods
Ended September 30, Ended September 30,
-------------------------- ------------------------
2000 1999 2000 1999
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
REVENUE.................. $ 74,459,079 $ 55,773,099 $28,707,209 $21,723,964
EXPENSES:
Direct operating....... 35,200,199 27,897,511 13,045,188 10,783,332
Regional marketing..... 8,965,756 3,625,044 4,906,064 1,293,999
Product research and
development........... 5,300,268 4,130,106 1,857,764 2,035,468
Selling, general and
administrative........ 17,469,551 10,886,127 6,911,263 3,877,211
Depreciation and
amortization.......... 19,427,068 14,380,297 6,852,339 5,697,965
------------ ------------ ----------- -----------
Loss from operations... (11,903,763) (5,145,986) (4,865,409) (1,964,011)
OTHER INCOME (EXPENSE):
Interest income........ 1,574,863 1,430,897 542,065 1,150,730
Interest expense....... (6,154,371) (8,933,319) (2,093,741) (3,089,338)
Other income........... 201,422 61,659 70,182 --
------------ ------------ ----------- -----------
Loss before minority
interest and
extraordinary item.... (16,281,849) (12,586,749) (6,346,903) (3,902,619)
Minority interest
related to convertible
preferred stock....... 998,636 -- 461,504 --
------------ ------------ ----------- -----------
Loss before
extraordinary item.... (15,283,213) (12,586,749) (5,885,399) (3,902,619)
EXTRAORDINARY ITEM:
Loss related to early
retirement of debt.... -- (743,506) -- (743,506)
------------ ------------ ----------- -----------
NET LOSS................. $(15,283,213) $(13,330,255) $(5,885,399) $(4,646,125)
============ ============ =========== ===========
LOSS PER SHARE
Loss per share before
extraordinary item,
basic and diluted..... $ ( 0.75) $ (0.74) $ (0.29) $ (0.19)
Extraordinary item per
share, basic and
diluted............... -- (0.04) -- (0.04)
------------ ------------ ----------- -----------
Net loss per share,
basic and diluted..... $ (0.75) $ ( 0.78) $ (0.29) $ (0.23)
============ ============ =========== ===========
Weighted average shares
outstanding, basic and
diluted................. 20,244,246 17,092,702 20,299,060 20,016,453
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
COINSTAR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the Nine Month Period Ended September 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
Accu.
Common Stock Contributed Other
----------------------- Capital for Comp. Accumulated
Shares Amount Warrants Income Deficit Total
---------- ------------ ----------- -------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, January 1,
2000................... 20,141,207 $157,737,504 $1,316,128 $ (1,304) $(103,786,808) $55,265,520
Issuance of shares under
employee stock purchase
plan................... 82,484 783,665 783,665
Exercise of stock
options................ 93,497 623,035 623,035
Comprehensive loss
Other comprehensive
income
Unrealized loss on
short-term invest-
ments available for
sale............... (4,216) (4,216)
Unrealized loss on
foreign currency
translation........ (9,614) (9,614)
-----------
Other comprehensive
loss................. (13,830)
-----------
Net loss................ (15,283,213) (15,283,213)
-----------
Comprehensive loss...... (15,297,043)
---------- ------------ ---------- -------- ------------- -----------
BALANCE, September 30,
2000................... 20,317,188 $159,144,204 $1,316,128 $(15,134) $(119,070,021) $41,375,177
========== ============ ========== ======== ============= ===========
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
COINSTAR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Nine Month Periods
Ended September 30,
----------------------------
2000 1999
------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss......................................... $ (15,283,213) $ (13,330,255)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization................... 19,427,068 14,380,296
Minority interest............................... (998,636) --
Debt discount amortization...................... 139,984 8,663,981
Unrealized gain (loss) on short-term investments
available for sale............................. (4,216) 2,879
Unrealized loss on foreign currency
translation.................................... (9,614) (1,313)
Cash provided (used) by changes in operating
assets and liabilities:
Investment interest receivable.................. 131,984 (81,304)
Prepaid expenses and other current assets....... (9,600) (2,080,085)
Other assets.................................... 162,881 (420,563)
Accounts payable................................ 1,588,374 2,711,231
Accrued liabilities............................. 2,432,396 4,060,414
------------- -------------
Net cash provided by operating activities....... 7,577,408 13,905,281
INVESTING ACTIVITIES:
Purchase of short-term investments.............. -- (16,522,298)
Sale of short-term investments.................. 9,162,841 12,603,019
Purchase of fixed assets........................ (19,275,348) (25,159,385)
Net proceeds from the sale of equipment......... 12,884 33,803
Asset purchase option........................... -- (600,000)
Purchase of intangible assets................... (3,920,972) --
------------- -------------
Net cash used by investing activities........... (14,020,595) (29,644,861)
FINANCING ACTIVITIES:
Principal payments on long-term debt............ (576,887) (12,820,598)
Proceeds from long-term bank debt............... -- 500,000
Proceeds from sale of subsidiary preferred stock
and warrants, including minority interest...... 5,500,600 --
Financing costs associated with long-term credit
facility....................................... -- (598,882)
Proceeds from sale of common stock, net of
issuance costs................................. -- 93,650,831
Proceeds from exercise of stock options and
issuance of shares under employee stock
purchase plan.................................. 1,406,700 1,391,292
------------- -------------
Net cash provided by financing activities....... 6,330,413 82,122,643
------------- -------------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS..................................... (112,774) 66,383,063
CASH AND CASH EQUIVALENTS:
Beginning of period............................. 78,736,908 37,688,205
------------- -------------
End of period................................... $ 78,624,134 $ 104,071,268
============= =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest........ $ 8,039,584 $ 215,397
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Purchase of vehicles financed by capital lease
obligation..................................... 863,420 458,058
Cashless exercise of warrants................... -- 165,220
Issuance of common stock........................ -- 271,875
Purchase of assets with warrants................ -- 169,167
Issuance of warrants under revolving credit
facility....................................... -- 723,211
Purchase of assets with common stock............ -- 386,250
</TABLE>
See notes to consolidated financial statements.
6
<PAGE>
COINSTAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Month Periods Ended September 30, 2000 and 1999
(Unaudited)
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation: The unaudited consolidated financial statements of
Coinstar, Inc. and subsidiaries (the "Company") included herein reflect all
adjustments, consisting only of normal recurring adjustments which, in the
opinion of management, are necessary to present fairly the Company's
consolidated financial position, results of operations and cash flows for the
periods presented.
These financial statements have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission (the "SEC") and in
accordance with accounting principles generally accepted in the United States
of America for interim financial information. Certain information and footnote
disclosures, normally included in annual financial statements prepared in
accordance with accounting principles generally accepted in the United States
of America, have been omitted pursuant to such SEC rules and regulations.
These financial statements should be read in conjunction with the Company's
audited financial statements and the accompanying notes included in the
Company's Form 10-K for the year ended December 31, 1999, filed with the SEC.
The results of operations for the nine and three month periods ended September
30, 2000 are not necessarily indicative of the results to be expected for any
subsequent quarter or for the entire fiscal year.
Principles of Consolidation: The financial statements include the accounts
of the Company. All inter-company transactions have been eliminated upon
consolidation.
Loss Per Share: Because the results from operations reflect a net loss for
all periods presented, basic and diluted loss per share is calculated based on
the same weighted average number of shares outstanding. The following warrants
and options have been excluded from the calculation because they are
antidilutive:
<TABLE>
<CAPTION>
Nine Month Nine Month
Period Ended Period Ended
September 30, 2000 September 30, 1999
------------------ ------------------
<S> <C> <C>
Warrants........................... 127,652 1,027,652
Options............................ 2,660,450 2,178,944
</TABLE>
Recent Accounting Pronouncements: In June 1998, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards ("SFAS")
No. 133, Accounting for Derivative Instruments and Hedging Activities. This
pronouncement requires an entity to recognize all derivatives as either assets
or liabilities in the statement of financial position and measure those
instruments at fair value. The Company believes the impact of adoption will
not be material to the financial statements, taken as a whole. SFAS No. 133,
as amended by SFAS No. 137 and 138 is effective for fiscal years beginning
after June 15, 2000.
The SEC recently issued Staff Accounting Bulletin ("SAB") 101, which
outlines the reporting requirements for revenue recognition. The Company's
accounting policies are in accordance with SAB 101; therefore, there will not
be a material impact upon adoption.
NOTE 2: TERMINATION OF SUPPLIER RELATIONSHIP
Through April 1999, Scan Coin AB of Malmo, Sweden was the Company's sole
source provider of its coin-counting device. Coinstar and Scan Coin have been
in a contract dispute since September 1998, at which time Scan Coin claimed
that the Company had breached the contract and made claims to certain of the
Company's intellectual property. On May 5, 1999, Scan Coin terminated its
agreement with the Company and reasserted the
7
<PAGE>
breach of contract claim and the claim to certain of the Company's
intellectual property. The parties have been working to settle the dispute
amicably since that time. There is no assurance, however, that the
disagreement will be settled amicably, and litigation may commence.
NOTE 3: FUNDING OF SUBSIDIARY AND ISSUANCE OF OPTIONS
On February 10, 2000, Meals.com, the Company's e-services subsidiary, sold
5.5 million shares of its Series A Preferred Stock, together with warrants to
purchase 5.5 million shares of its common stock at an exercise price of $0.125
per share, to an outside investor group for $5.5 million, which represented
approximately an 11% interest in the subsidiary. As part of the financing, the
Company invested $10.0 million in exchange for 10 million shares of Series A-1
Preferred Stock. The holders of Series A Preferred Stock and Series A-1
Preferred Stock generally have identical rights, except that the holders of
Series A Preferred Stock are entitled to one vote per share while holders of
Series A-1 Preferred Stock are entitled to five votes per share on all matters
to be voted on by the Meals.com stockholders. Also in connection with the
Meals.com financing, the Company provided a $15.6 million credit facility. At
September 30, 2000, the credit facility's available balance was approximately
$9.5 million. Interest accretes on the credit facility at Imperial Bank's
prime commercial lending rate plus 300 basis points. The Series A Preferred
Stock sold to outside investors has a $5.5 million liquidation preference.
During the nine months ended September 30, 2000, Meals.com granted options
to purchase shares of its common stock to its employees and to employees and
non-employee directors of the Company. Such options were issued with an
exercise price equal to the fair market value of the common stock on the date
of grant. Meals.com has recorded unearned compensation for the options issued
to certain Coinstar employees and non-employee directors based on the
requirements outlined in SFAS No. 123, Accounting for Stock Based
Compensation, and Emerging Issues Task Force Bulletin No. 96-18, Accounting
for Equity Instruments That Are Issued to Other Than Employees for Acquiring,
or in Conjunction with Selling, Goods or Services. As required by FASB
Interpretation No. 44, Accounting for Certain Transactions Involving Stock
Compensation, which was issued in March 2000, the unearned compensation has
been eliminated in the consolidated financial statements of the Company.
8
<PAGE>
NOTE 4: BUSINESS SEGMENT INFORMATION
Operating segments as defined in SFAS No. 131, Disclosures about Segments of
an Enterprise and Related Information, are components of an enterprise for
which separate financial information is available and regularly reviewed by
the chief operating decision-maker.
The Company is organized into three reportable business segments; the United
States core business, the International business and the E-services business
(Meals.com). Information about these three segments has been disclosed in the
table below.
<TABLE>
<CAPTION>
Nine Month Three Month
Periods Ended Periods Ended
September 30, September 30,
------------------ ------------------
2000 1999 2000 1999
-------- -------- -------- --------
(In thousands) (In thousands)
<S> <C> <C> <C> <C>
Revenue:
United States core business...... $ 73,912 $ 55,634 $ 28,464 $ 21,646
International business........... 447 134 199 73
E-services business.............. 100 5 44 5
-------- -------- -------- --------
Total revenues................. $ 74,459 $ 55,773 $ 28,707 $ 21,724
======== ======== ======== ========
Net loss:
United States core business...... $ (6,375) $(10,453) $ (1,827) $ (3,252)
International business........... (776) (992) (295) (215)
E-services business.............. (9,170) (1,885) (4,238) (1,179)
Minority interest and
eliminations.................... 1,038 -- 475 --
-------- -------- -------- --------
Total net loss................. $(15,283) $(13,330) $ (5,885) $ (4,646)
======== ======== ======== ========
Total assets:
United States core business...... $165,603 $187,163 $165,603 $187,163
International business........... 870 276 870 276
E-services business.............. 12,347 -- 12,347 --
Intercompany eliminations........ (20,514) (1,146) (20,514) (1,146)
-------- -------- -------- --------
Total assets................... $158,306 $186,293 $158,306 $186,293
======== ======== ======== ========
</TABLE>
NOTE 5: CREDIT AGREEMENT
On September 26, 2000, the Company amended the Credit Agreement, dated
February 19, 1999, with Imperial Bank, for itself and as agent for Bank
Austria Creditanstalt Corporate Finance, Inc., whereby Bank Austria was
released from its obligations under the Credit Agreement. The amended Credit
Agreement with Imperial Bank provides for a credit facility of up to $13
million, consisting of a revolving loan of $10 million and a term loan of $3
million. The amended Credit Agreement expires in September 2006 and releases
the Company from its obligation to maintain minimum deposits with Imperial
Bank.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The discussion in this Form 10-Q contains forward-looking statements
regarding us, our business, prospects and results of operations that involve
risks and uncertainties. Our actual business, prospects and results of
operations could differ materially from those discussed in this report.
Factors that could cause or contribute to such differences include, but are
not limited to, factors relating to Meals.com's future performance under its
contracts, as well as those factors discussed under the caption "Risk Factors"
and elsewhere in this report and in our Form 10-K for the year ended
December 31, 1999. You are cautioned not to place undue reliance on these
forward-looking statements, which reflect management's analysis only as of the
date hereof. We undertake no obligation to publicly release the results of any
revision to these forward-looking statements, which may be
9
<PAGE>
made to reflect events or circumstances after the date hereof or to reflect
the occurrence of unanticipated events. You are urged to carefully review and
consider the various disclosures made by us in this report and in our other
reports filed with the Securities and Exchange Commission that attempt to
advise interested parties of the risks and factors that may affect our
business, prospects and results of operations.
Overview
We currently derive substantially all our revenue from coin processing
services generated by our installed base of Coinstar coin-counting units
located in supermarket chains in 45 states across the United States, plus the
District of Columbia. We generate revenue based on a processing fee charged on
the total dollar amount of coins processed in a transaction. Coin processing
fee revenue is recognized at the time the customers' coins are counted by the
Coinstar unit. Overall revenue growth is dependent on both the rate of new
installations and the growth in coin processing volumes of our installed base.
Our experience to date is that coin processing volumes per unit have generally
increased with the length of time the unit is in operation as trial levels of
the service increase, driving initial trial and repeat usage for the service.
There can be no assurance, however, that unit volumes will continue to
increase as a function of the time the unit is in operation, or that unit
volumes will not be affected by other factors. We expect that as we continue
to aggressively expand installations relative to the size of our installed
base, the average revenue per unit may decrease as the per unit dollar volume
of more mature units increases. We believe that coin processing volumes per
unit may also be affected by other factors such as public relations,
advertising and other activities that promote trials of the units, as well as
the amount of consumer traffic in the stores in which the units are located,
the total number of machines in a region relative to the population base in
the region, and seasonality. We believe that seasonality affects coin
processing volumes because on a relative basis, coin processing volumes have
been lower in the months of January, February, September, and October. This
trend mirrors the seasonality patterns of our supermarket partners.
We formed a wholly owned subsidiary, Coinstar International, Inc., in March
1998 to explore expanding our operations internationally. Coinstar
International is piloting 56 Coinstar units in Canada to determine the
viability of the Canadian market for our services and is piloting 22 Coinstar
units in the United Kingdom. In addition, Coinstar International is
investigating the viability of our services in selected other countries.
We also formed a wholly owned subsidiary, Meals.com, in December 1998 to
explore the development and deployment of e-services technology, including the
in-store Shopper(TM) kiosk. On February 10, 2000, Meals.com sold 5.5 million
shares of its Series A Preferred Stock, together with warrants to purchase 5.5
million shares of its common stock at an exercise price of $0.125 per share,
to an outside investor group for $5.5 million, which represented approximately
an 11% interest in the subsidiary. As part of the financing, we invested $10.0
million in exchange for 10 million shares of Series A-1 Preferred Stock. The
holders of Series A Preferred Stock and Series A-1 Preferred Stock generally
have identical rights, except that the holders of Series A Preferred Stock are
entitled to one vote per share while holders of Series A-1 Preferred Stock are
entitled to five votes per share on all matters to be voted on by the
Meals.com stockholders. Also in connection with the Meals.com financing, we
provided a $15.6 million credit facility. At September 30, 2000, the credit
facility's available balance was approximately $9.5 million. Interest accretes
on the credit facility at Imperial Bank's prime commercial lending rate plus
300 basis points. The Series A preferred stock sold to outside investors has a
$5.5 million liquidation preference.
Our direct operating expenses are comprised of the regional expenses
associated with Coinstar coin-counting unit operations and support and consist
primarily of coin pick-up and processing, field operations support and related
expenses, retail operations support and the amount of our service fee that we
share with our retail partners. Coin pick-up and processing costs, which
represent a large portion of direct operating expenses, vary based on the
level of total coin processing volume and the density of the units within a
region. We believe that while coin pick-up and processing costs are variable
based on units in service and coin volume generated, economies related to
these direct expense components can be achieved through increasing the density
of units in operation in regional markets. Field service operations and
related expenses vary depending on the number of geographic regions in which
Coinstar units are located and the density of the units within a region.
Regional
10
<PAGE>
marketing expenses are comprised of ongoing marketing, advertising and public
relations efforts in existing market regions and start-up marketing expenses
incurred to launch our services in new regional markets. Product research and
development expense consists of the development costs of the Coinstar unit
software, network applications, Coinstar unit improvements and new product
development. Selling, general and administrative expenses are comprised of
management compensation, administrative support for field operations, the
customer service center, sales and marketing support, systems and engineering
support, computer network operations, accounting, human resources and
occupancy expenses. Depreciation and amortization consists primarily of
depreciation charges on Coinstar units and, to a lesser extent, depreciation
on furniture and fixtures, automobiles, computer equipment and amortization of
intangibles. Other income consists of rental income from a sublease of unused
office space.
Since 1995, we have devoted significant resources to building our sales and
marketing organization, adding administrative personnel and developing the
network systems and infrastructure to support the rapid growth of our
installed base of Coinstar coin-counting units. The cost of this expansion,
the expansion of Meals.com, and the significant depreciation expense of our
installed network have resulted in significant operating losses and an
accumulated deficit of $119.1 million as of September 30, 2000. We expect to
continue to evaluate new marketing and promotional programs to increase the
breadth and rate of customer utilization of our coin counting service and to
engage in systems and product research and development. We expect these
expenses will negatively impact our operating results. We believe that our
future revenue growth, operating margin gains and profitability will be
dependent upon retailer and consumer acceptance of Meals.com or our possible
deconsolidation of Meals.com, the penetration of our installed base with
retail partners in existing markets, expansion and penetration of
installations in new market regions, and successful ongoing marketing and
promotional activities to sustain the growth in unit coin volume over time.
Given the unpredictability of the timing of installations with retail partners
and the resulting revenues, and the continued market acceptance of our service
by consumers and retail partners, our operating results for any quarter are
subject to significant variation; and, we believe that period-to-period
comparisons of our results of operations are not necessarily meaningful and
should not be relied upon as indications of future performance.
Results of Operations
The following table shows revenue and expense as a percent of revenue for
the periods ended:
<TABLE>
<CAPTION>
Nine Month Three Month
Periods Ended Periods Ended
September 30, September 30,
--------------- ---------------
2000 1999 2000 1999
------ ------ ------ ------
<S> <C> <C> <C> <C>
Revenue................................. 100.0 % 100.0 % 100.0 % 100.0 %
Expenses:
Direct operating...................... 47.3 50.0 45.4 49.6
Regional marketing.................... 12.0 6.5 17.1 6.0
Product research and development...... 7.1 7.4 6.5 9.4
Selling, general, and administrative.. 23.5 19.5 24.1 17.8
Depreciation and amortization......... 26.1 25.8 23.9 26.2
------ ------ ------ ------
Loss from operations.................... (16.0)% (9.2)% (16.9)% (9.0)%
====== ====== ====== ======
</TABLE>
Three Month Periods Ended September 30, 2000 and 1999
Revenue
Revenue increased by 32.1% to $28.7 million for the quarter ended September
30, 2000 from $21.7 million in the comparable 1999 period. The increase was
due principally to the increase in the number of Coinstar units in service
during the 2000 period. The installed base of Coinstar units increased to
8,091 as of September 30, 2000 from 6,457 units as of September 30, 1999.
11
<PAGE>
Direct Operating Expenses
Direct operating expenses increased to $13.0 million for the quarter ended
September 30, 2000 from $10.8 million in the comparable 1999 period. The
increase in direct operating expenses was primarily attributable to an
increase in field service personnel and direct support expenses associated
with our growth and expansion into 19 new regional markets. Direct operating
expenses as a percentage of revenue decreased to 45.4% in the quarter ended
September 30, 2000 from 49.6% in the comparable 1999 period. The decrease in
direct operating expenses as a percentage of revenue was the result of (1) the
realization of coin pick-up and processing cost economies from increased
regional densities and utilization of cheaper, more efficient coin pick-up
methods, and (2) the decline in field service expenses per unit as a
percentage of revenue brought about by our increased density in our existing
markets.
Regional Marketing
Regional marketing expenses increased to $4.9 million for the quarter ended
September 30, 2000 from $1.3 million in the comparable 1999 period. The
increase in regional marketing expense was the result of increased television
and other advertising in selected markets. Regional marketing as a percentage
of revenue increased to 17.1% in the quarter ended September 30, 2000 from
6.0% in the comparable 1999 period. The increase in regional marketing as a
percentage of revenue was the result of (1) increased advertising coverage in
selected markets and (2) higher advertising costs.
Product Research and Development
Product research and development expenses decreased to $1.9 million for the
quarter ended September 30, 2000 from $2.0 million in the comparable 1999
period. The decrease in product research and development costs was primarily
due to capitalization of software development costs made in our subsidiary,
Meals.com. Product research and development as a percentage of revenue
decreased slightly to 6.5% in the quarter ended September 30, 2000 from 9.4%
in the comparable 1999 period.
Selling, General and Administrative
Selling, general and administrative expenses increased to $6.9 million for
the quarter ended September 30, 2000 from $3.9 million in the comparable 1999
period. Selling, general and administrative expenses as a percentage of
revenue increased to 24.1% in the quarter ended September 30, 2000 from 17.8%
in the comparable 1999 period. The increase in selling, general, and
administrative expenses as a percentage of revenue was the result of (1)
increasing volumes processed by the network combined with (2) the investments
in Meals.com product development, marketing and staffing.
Depreciation and Amortization
Depreciation and amortization expense increased to $6.9 million for the
quarter ended September 30, 2000 from $5.7 million in the comparable 1999
period. The increase was primarily due to the increase in the installed base
of Coinstar units and amortization of software development during the period.
Depreciation and amortization as a percentage of revenue decreased to 23.9% in
the quarter ended September 30, 2000 from 26.2% in the comparable 1999 period.
The decrease in depreciation and amortization as a percentage of revenue was
the result of revenues increasing faster than depreciation and amortization.
Other Income and Expense
We generated other income of $70,000 for the quarter ended September 30,
2000 primarily due to the subleasing of unused office space.
Interest income decreased to $542,000 for the quarter ended September 30,
2000 from $1.2 million in the comparable 1999 period. The decrease in interest
income is attributed to a decrease in previously invested cash that was
subsequently used to repurchase a portion of the Senior Subordinated Discount
Notes.
12
<PAGE>
Interest expense decreased to $2.1 million for the quarter ended September
30, 2000 from $3.1 million in the comparable 1999 period. The decrease was
primarily due to the reduced accretion of the Senior Subordinated Discount
Notes due 2006 since $34 million was repaid during 1999 using proceeds from
our 1999 common stock offering.
Net Loss
Net loss increased to $5.9 million for the quarter ended September 30, 2000
from $4.6 million in the comparable 1999 period. The increase in the net loss
was primarily due to consolidating the expenses of Meals.com and an increase
in our regional marketing. Regional marketing for the quarter ended September
30, 2000 was $3.6 million higher than the comparable 1999 period. Despite an
increase in net loss, our direct contribution (i.e., revenue minus direct
operating expenses) increased. This reflects the operating leverage of the
Coinstar network resulting from the relatively fixed nature of a number of our
costs. In the longer term, we expect that we will not be required to add as
much infrastructure as we have in the past to support our installed base and
as a result expect to achieve profitability as our revenue from our larger
base of installed units grows proportionately faster than our expenses. There
can be no assurance, however, that we will install a sufficient number of
units or obtain sufficient market acceptance to allow us to achieve or sustain
profitability. In addition, this profitability may be hampered by the
continuing consolidation of Meals.com's losses.
Nine Month Periods Ended September 30, 2000 and 1999
Revenue
Revenue increased by 33.5% to $74.5 million for the nine months ended
September 30, 2000 from $55.8 million in the comparable 1999 period. The
increase was due principally to the increase in the number of Coinstar units
in service during the 2000 period. The installed base of Coinstar units
increased to 8,091 as of September 30, 2000 from 6,457 units in the comparable
1999 period.
Direct Operating Expenses
Direct operating expenses increased to $35.2 million for the nine months
ended September 30, 2000 from $27.9 million in the comparable 1999 period. The
increase in direct operating expenses was primarily attributable to the
increase in field service personnel and direct support expenses associated
with our growth and expansion into 19 new regional markets. Direct operating
expenses as a percentage of revenue decreased to 47.3% in the nine months
ended September 30, 2000 from 50.0% in the comparable 1999 period. The
decrease in direct operating expenses as a percentage of revenue was the
result primarily of (1) the realization of coin pick-up and processing cost
economies from increased regional densities and utilization of cheaper, more
efficient coin pick-up methods, and (2) the decline in field service expenses
per unit as a percentage of revenue brought about by our increased density in
our existing markets.
Regional Marketing
Regional marketing expenses increased to $9.0 million for the nine months
ended September 30, 2000 from $3.6 million in the comparable 1999 period. The
increase in regional marketing expense was the result of an increased level of
television and other advertising in selected markets. Regional marketing as a
percentage of revenue increased to 12.0% in the nine months ended September
30, 2000 from 6.5% in the comparable 1999 period. The increase in regional
marketing as a percentage of revenue was the result primarily of (1) increased
advertising coverage in selected markets, and (2) higher advertising costs.
Product Research and Development
Product research and development expenses increased to $5.3 million for the
nine months ended September 30, 2000 from $4.1 million in the comparable 1999
period. Product research and development as a
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<PAGE>
percentage of revenue decreased to 7.1% in the nine months ended September 30,
2000 from 7.4% in the comparable 1999 period. The decrease in product research
and development costs reflects the capitalization of expenditures associated
with the software development by Meals.com.
Selling, General and Administrative
Selling, general and administrative expenses increased to $17.5 million for
the nine months ended September 30, 2000 from $10.9 million in the comparable
1999 period. Selling, general and administrative expenses as a percentage of
revenue increased to 23.5% in the nine months ended September 30, 2000 from
19.5% in the comparable 1999 period. The increase in selling, general, and
administrative expenses as a percentage of revenue was primarily the result of
(1) increased coin volumes processed by the network combined with (2)
investments in Meals.com product development, marketing, and staffing.
Depreciation and Amortization
Depreciation and amortization expense increased to $19.4 million for the
nine months ended September 30, 2000 from $14.4 million in the comparable 1999
period. The increase was primarily due to (1) the increase in the installed
base of Coinstar units during these periods and (2) the increase in
amortization of intangible assets. Depreciation and amortization as a
percentage of revenue increased to 26.1% in the nine months period ended
September 30, 2000 from 25.8% in the comparable 1999 period.
Other Income and Expense
We generated other income of $201,420 for the nine months ended September
30, 2000 from the subleasing of unused office space.
Interest income increased to $1.6 million for the nine months ended
September 30, 2000 from $1.4 million in the comparable 1999 period. The
increase in interest income is attributed to an increase in invested cash
balances during the period resulting from improvements in cash concentration
processes.
Interest expense decreased to $6.2 million for the nine months ended
September 30, 2000 from $8.9 million in the comparable 1999 period. The
decrease was primarily due to the reduced accretion of the Senior Subordinated
Discount Notes due 2006 since $34 million was repaid during 1999 using
proceeds from our 1999 common stock offering.
Net Loss
Net loss increased to $15.3 million for the nine months ended September 30,
2000 from $13.3 million in the comparable 1999 period. The increase in the net
loss was primarily due to consolidating the expenses of our Meals.com
subsidiary and an increase in our regional marketing. Regional marketing for
the nine months ended September 30, 2000 was $5.3 million higher than the
comparable 1999 period. Despite an increase in net loss, our direct
contribution (i.e., revenue minus direct operating expenses) increased. This
reflects the operating leverage of the Coinstar network resulting from the
relatively fixed nature of a number of our costs. In the longer term, we
expect that we will not be required to add as much infrastructure as we have
in the past to support our installed base and as a result expect to achieve
profitability as our revenue from our larger base of installed units grows
proportionately faster than our expenses. There can be no assurance, however,
that we will install a sufficient number of units or obtain sufficient market
acceptance to allow us to achieve or sustain profitability. In addition, this
profitability may be hampered by the continuing consolidation of Meals.com's
losses.
Liquidity and Capital Resources
As of September 30, 2000, we had cash and cash equivalents of $78.6 million,
and working capital of $30.0 million. Cash and cash equivalents include $38.0
million of funds in transit that represent amounts being processed by armored
car carriers or residing in Coinstar units. Net cash provided by operating
activities was $7.6 million for the nine months ended September 30, 2000,
compared to $13.9 million provided in the comparable 1999 period. The decrease
in cash provided by operating activities is primarily related to decreases
14
<PAGE>
in debt discount amortization, accounts payable and accrued expenses partly
offset by an increase in depreciation and amortization.
Net cash used by investing activities for the nine months ended September
30, 2000 was $14.0 million compared to $29.6 million used in 1999. Capital
expenditures during the nine months ended September 30, 2000 were $19.3
million compared to $25.2 million in the comparable 1999 period. Capital
expenditures decreased primarily due to the decreased purchases of Coinstar
units. Net cash provided by financing activities for the nine months ended
September 30, 2000 was $6.3 million, which primarily was the result of (1)
proceeds from the sale of preferred stock by Meals.com and (2) proceeds from
the exercise of stock options and employee stock purchases, offset by (3)
payments on long-term debt. Net cash provided by financing activities for the
comparable 1999 period was $82.1 million, which was the result of proceeds
from the sale of common stock and proceeds from the exercise of employee stock
options, offset by principal payments on long-term debt, and financing costs
associated with the long-term credit facility.
With respect to financing activities, we completed a public offering of
4,000,000 shares of common stock in June 1999 at a purchase price of $22.375
per share for proceeds, net of issuance costs, of approximately $83.8 million.
The net proceeds received have been and will continue to be used to expand the
network in the United States, to support planned expansion internationally, to
develop and market new products and product enhancements and for working
capital and general corporate purposes. In July 1999, the underwriters
exercised their option to purchase an additional 466,400 shares of common
stock at a purchase price of $22.375 per share for net proceeds of
approximately of $9.8 million.
As of September 30, 2000, we had available secured irrevocable letters of
credit with two banks and a landlord that totaled $6.8 million. These letters
of credit, which expire through August 31, 2001, are available to
collateralize certain obligations to third parties. As of September 30, 2000,
no amounts were outstanding under these letters of credit agreements.
On September 26, 2000, we amended the Credit Agreement, dated February 19,
1999, with Imperial Bank, for itself and as agent for Bank Austria
Creditanstalt Corporate Finance, Inc., whereby Bank Austria was released from
its obligations under the Credit Agreement. The amended Credit Agreement with
Imperial Bank provides for a credit facility of up to $13 million, consisting
of a revolving loan of $10 million and a term loan of $3 million. The amended
Credit Agreement expires in September 2006 and releases the Company from its
obligation to maintain minimum deposits with Imperial Bank.
As of September 30, 2000, we had outstanding $61.0 million of our senior
notes. We paid our first cash interest payment of $4.0 million on March 31,
2000. We will have debt service obligations of over $7.9 million per year
until October 2006 when the principal amount of $61.0 million will be due. The
Indenture governing the notes contains covenants that, among other
restrictions, limit our ability to pay dividends or make other restricted
payments, engage in transactions with affiliates, incur additional
indebtedness, effect asset dispositions, or merge or sell substantially all
our assets.
On February 10, 2000, Meals.com sold 5.5 million shares of its Series A
Preferred Stock, together with warrants to purchase 5.5 million shares of its
common stock at an exercise price of $0.125 per share, to an outside investor
group for $5.5 million, which represented approximately an 11% interest in the
subsidiary. As part of the financing, we invested $10.0 million in exchange
for 10 million shares of Series A-1 Preferred Stock. The holders of Series A
Preferred Stock and Series A-1 Preferred Stock generally have identical
rights, except that the holders of Series A Preferred Stock are entitled to
one vote per share while holders of Series A-1 Preferred Stock are entitled to
five votes per share on all matters to be voted on by the Meals.com
stockholders. Also in connection with the Meals.com financing, we provided a
$15.6 million credit facility. At September 30, 2000, the credit facility's
available balance was approximately $9.5 million. Interest accretes on the
credit facility at Imperial Bank's prime commercial lending rate plus 300
basis points. The Series A Preferred Stock sold to outside investors has a
$5.5 million liquidation preference.
We believe existing cash and cash equivalents, our $13.0 million credit
agreement with Imperial Bank, and cash generated from operations will be
sufficient to fund our cash requirements and capital expenditure needs for
15
<PAGE>
at least the next 12 months for the continued expansion of the domestic
Coinstar network at the recent installation rate, to continue to fund the
pilot deployment of Coinstar units internationally, and to fund the
development and marketing of new products and enhancements. After that time,
the extent of additional financing needed will depend on the success of our
business. If we significantly increase installations beyond planned levels or
if unit coin processing volumes generated are lower than historical levels,
our cash needs will be increased. Our future capital requirements will depend
on a number of factors, including the timing and number of installations, the
type and scope of service enhancements, the success of our marketing
initiatives, the level of market acceptance of our service, the feasibility of
international expansion, and potential new product and service offerings, and
product and service enhancements.
Quarterly Financial Results
The following table sets forth selected unaudited quarterly financial
information and operating data for the last eight quarters. This information
has been prepared on the same basis as our unaudited consolidated financial
statements and includes, in the opinion of management, all normal and
recurring adjustments that management considers necessary for a fair statement
of the quarterly results for the periods. The operating results and data for
any quarter are not necessarily indicative of the results for future periods.
<TABLE>
<CAPTION>
Three-month periods ended
--------------------------------------------------------------------------------
Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
2000 2000 2000 1999 1999 1999 1999 1998
--------- -------- -------- -------- --------- -------- -------- --------
(Dollars in thousands except per unit data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Consolidated Statements
of Operations
Revenue................. $ 28,707 $ 24,714 $ 21,037 $ 21,959 $ 21,723 $ 18,258 $ 15,791 $ 14,802
Expenses:
Direct operating....... 13,045 11,733 10,422 10,938 10,783 9,176 7,939 7,458
Regional marketing..... 4,906 3,567 493 2,756 1,294 1,012 1,318 1,077
Product research and
development........... 1,858 1,710 1,732 1,441 2,035 1,155 940 1,138
Selling, general and
administrative........ 6,911 5,502 5,056 4,135 3,877 3,628 3,381 3,579
Depreciation and
amortization.......... 6,852 6,409 6,166 5,934 5,698 4,580 4,103 3,669
-------- -------- -------- -------- -------- -------- -------- --------
Loss from operations.... $ (4,865) $ (4,207) $ (2,832) $ (3,245) $ (1,964) $ (1,293) $ (1,890) $ (2,119)
======== ======== ======== ======== ======== ======== ======== ========
United States Core
Number of new Coinstar
units installed during
the period............. 340 328 423 488 668 540 416 375
Installed base of
Coinstar units at end
of period.............. 8,013 7,673 7,345 6,922 6,434 5,766 5,226 4,810
Average age of network
for the period
(months)............... 26.2 24.5 22.9 21.4 20.3 19.8 19.0 17.6
Number of designated
marketing areas
(DMA's)................ 99 90 83 83 80 72 62 57
Dollar value of coins
processed.............. $319,828 $275,512 $235,125 $245,315 $243,213 $204,629 $177,258 $187,241
Revenue................. 28,465 24,521 20,926 21,833 21,646 18,212 15,776 14,792
Annualized revenue per
average installed
unit(1)................ 14,539 13,118 11,740 13,052 14,158 13,350 12,717 12,936
Direct contribution(2).. 15,578 12,894 10,646 10,978 10,938 9,121 7,887 7,334
Direct contribution
margin................. 54.7% 52.6% 50.9% 50.3% 50.5% 50.1% 50.0% 49.6%
Annualized direct
contribution per
average installed
unit(1)(2)............. $ 7,957 $ 6,898 $ 5,973 $ 6,563 $ 7,154 $ 6,686 $ 6,357 $ 6,414
Regional marketing...... 4,906 3,567 493 2,756 1,317 989 1,319 1,077
Research and
development............ 825 808 744 919 1,643 838 779 1,138
Selling, general, and
administrative......... 4,275 3,987 4,075 3,167 3,094 3,178 3,193 3,209
EBITDA(3)............... 5,572 4,532 5,334 4,136 4,884 4,116 2,596 1,910
International--100% owned
subsidiary
Revenue................. 198 150 98 88 73 46 15 11
Total operating
expenses............... 467 358 331 382 283 496 335 369
E-Services--89% owned
subsidiary
Revenue................. 44 43 14 39 5 -- -- --
Total operating
expenses............... 3,459 2,261 1,841 1,249 1,010 469 122 --
</TABLE>
16
<PAGE>
--------
(1) Based on actual quarterly results annualized divided by the monthly
averages of units in operation over the applicable period.
(2) Direct contribution is defined as revenue less direct operating expenses.
We use direct contribution as a measure of operating performance to assist
in understanding our operating results. Direct contribution is not a
measure of financial performance under generally accepted accounting
principles ("GAAP") and should not be considered in isolation or as an
alternative to gross margin, income (loss) from operations, net income
(loss), or any other measure of performance under GAAP.
(3) EBITDA represents earnings before interest expense, income taxes,
depreciation, amortization and other income/expense. EBITDA, as defined,
does not represent and should not be considered as an alternative to net
income or cash flow from operations as determined by GAAP. We, however,
believe that EBITDA, as defined, provides useful information regarding our
ability to service and/or incur indebtedness.
We believe that coin processing volumes have been affected by seasonality.
In particular, coin processing volumes have been lower in the months of
January, February, September and October. This trend mirrors the seasonality
patterns of our supermarket partners. There can be no assurance, however, that
such seasonal trends will continue. Any projections of future seasonality are
inherently uncertain due the lack of comparable companies engaged in the coin
processing business.
In addition to fluctuations in revenue resulting from factors affecting
customer usage, timing of unit installations will result in significant
fluctuations in quarterly results. The rate of installations does not follow a
regular pattern, as it depends principally on installation schedules
determined by agreements between us and our retail distribution partners,
variable length of partner trial periods and the planned coordination of
multiple partner installations in a given geographic region.
Quarterly losses from operations during the periods presented were the
result of higher direct operating expenses associated with the significant
increase in our installed base, higher depreciation and amortization expense
from the expansion of the installed base and the significantly higher level of
systems infrastructure and management personnel to support our accelerated
growth. We expect to continue to incur substantial operating losses from
operations as we continue to increase our installed base of Coinstar units.
New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative
Instruments and Hedging Activities. This pronouncement requires an entity to
recognize all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. We believe the
impact of adoption will not be material to the financial statements, taken as
a whole. SFAS No. 133, as amended by SFAS No. 137 and 138 is effective for
fiscal years beginning after June 15, 2000.
The SEC recently issued Staff Accounting Bulletin ("SAB") 101, which
outlines the reporting requirements for revenue recognition. Our accounting
policies are in accordance with SAB 101; therefore, there will not be a
material impact upon adoption.
17
<PAGE>
Risk Factors
You should carefully consider the risks described below before making an
investment decision. The risks and uncertainties described below are not the
only ones facing our company. Additional risks and uncertainties not presently
known to us or that we currently deem immaterial also may impair our business
operations. If any of the following risks actually occur, our business could
be harmed. In such case, the trading price of our common stock could decline
and you may lose all or part of your investment.
We have a history of sustained operating losses and we expect such losses to
continue. We have incurred substantial losses since inception in 1991. Our net
loss was $29.6 million for 1997, $24.0 million for 1998, and $21.4 million for
1999. As of September 30, 2000, we had an accumulated deficit of $119.1
million. Our operating losses to date have resulted primarily from expenses
incurred in the development, marketing and operation of the Coinstar units,
expansion and maintenance of the network, administrative and occupancy
expenses at our headquarters, depreciation and amortization and losses
attributable to our Meals.com subsidiary. We expect to continue to incur
operating losses as we continue to increase our installed base of Coinstar
units and seek to develop and market new products, services and enhancements,
including the development and deployment of our electronic commerce
technology, including Meals.com and the in-store Shopper kiosk.
Our coin processing service is our major source of revenue. We have derived
until now, and expect for the foreseeable future to derive, substantially all
of our revenue from the operation of Coinstar units. Accordingly, market
acceptance of our coin processing service is critical to our future success.
If demand for our coin processing service does not continue to grow due to
lack of market acceptance, technological change, competition or other factors,
our business, financial condition and results of operations and ability to
achieve sufficient cash flow to service our indebtedness could be seriously
harmed. To date, we have not derived any significant revenue from our
e-services technology and do not anticipate significant revenue from this
source in the near future.
Our future profitability is uncertain and may be hampered by the continued
consolidation of Meals.com's losses. After several years of development, we
commenced commercial deployment of Coinstar units in 1994 and placed
approximately 78% of our current installed base in 1997, 1998 and 1999.
Therefore, there is limited historical financial information on which to base
an evaluation of our performance. We cannot be certain that we will install a
sufficient number of our Coinstar units or obtain sufficient market acceptance
to allow us to achieve or sustain profitability, or generate sufficient cash
flow to meet our capital and operating expenses and debt service obligations.
Our majority-owned subsidiary, Meals.com, is an early-stage Internet start-
up and is subject to the risks encountered by similarly situated companies.
Meals.com has incurred substantial losses since its inception in 1998. Our
portion of its net loss for 1999 was $3.2 million. As of September 30, 2000,
our portion of its accumulated deficit was $11.2 million. Meals.com's success
will be dependent upon various factors, including the ability to:
. gain market acceptance of its products and services,
. achieve effective and measurable results for its supermarket and
packaged goods manufacturer customers,
. successfully execute on its customer contracts, and
. continue to develop and update its technologies to keep pace with the
growth of the Internet and changes in technology.
The market that Meals.com is entering is relatively untested and as a result
it is difficult to predict future performance.
Our Board of Directors appointed a special committee comprised of outside
directors to evaluate alternatives concerning a potential deconsolidation of
Meals.com's financial results from our financial results. We are
18
<PAGE>
uncertain as to whether a deconsolidation will be feasible or what impact a
deconsolidation will have on our stock price if accomplished.
Our future operating results remain uncertain. You should not consider prior
growth rates in our revenue to be indicative of our future operating results.
The timing and amount of future revenues will depend almost entirely on our
ability to obtain new agreements with potential retail partners for the
installation of Coinstar units, the successful deployment and operation of our
coin processing network and on customer utilization of our service. Our future
operating results will depend upon many other factors, including:
. the level of product and price competition,
. the processing fee we charge consumers to use our service, which we
increased to 8.9% in December 1998 and which may change again in the
future,
. the amount of our processing fee that we share with our retail partners,
. our success in expanding our network and managing our growth,
. our ability to develop and market product enhancements and new products,
such as those being developed by Meals.com, and the timing of such
product enhancements,
. our ability to enter into and penetrate new international markets, such
as the United Kingdom, Canada, and other selected foreign markets,
. activities of and acquisitions by competitors,
. the ability to hire additional employees, and
. the timing of such hiring and the ability to control costs.
We depend upon key personnel and need to hire additional personnel. Our
performance is substantially dependent on the continued services of our
executive officers and key employees, all of whom we employ on an at-will
basis. Our long-term success will depend on our ability to recruit, retain and
motivate highly skilled personnel. Competition for such personnel is intense.
We have at times experienced difficulties in recruiting qualified personnel,
and we may experience difficulties in the future. On November 2, 2000, we
announced that Dan Gerrity, our chief executive officer, was resigning
effective November 15, 2000. The inability to attract and retain necessary
technical and managerial personnel could seriously harm our business,
financial condition and results of operations and our ability to achieve
sufficient cash flow to service our indebtedness.
Our stock price has been and may continue to be volatile. Our common stock
price has fluctuated substantially since our initial public offering in July
1997. The market price of our common stock could decline from current levels
or continue to fluctuate. The market price of our common stock may be
significantly affected by the following factors, including:
. operating results below market expectations,
. trends and fluctuations in use of Coinstar units,
. changes in, or our failure to meet financial estimates by securities
analysts,
. period-to-period fluctuations in our financial results,
. announcements of technological innovations or new products or services
by us or our competitors,
. the termination of one or more retail distribution contracts,
. timing of installations relative to financial reporting periods,
. release of reports,
. industry developments,
19
<PAGE>
. market acceptance of the Coinstar service by retail partners and
consumers,
. market acceptance of Meals.com and the potential deconsolidation of
Meals.com, and
. economic and other external factors.
In addition, the securities markets have from time to time experienced
significant price and volume fluctuations that are unrelated to the operating
performance of particular companies. These market fluctuations may seriously
harm the market price of our common stock.
Our business is dependent on continued market acceptance by consumers. We
are substantially dependent on continued market acceptance of our coin
processing service by consumers. The self-service coin processing market is
relatively new and evolving and we cannot predict the future growth rate and
size of this market. While consumers to date have been somewhat receptive to
our existing installed base of Coinstar units, we cannot be certain that the
operating results of the installed units will continue to be favorable or that
past results will be indicative of future market acceptance of our service.
We believe that market acceptance of the Coinstar unit is dependent on the
consumer's perception that the units are conveniently located, easy to use,
accurate and reliable. Even if we are successful in promoting awareness of the
Coinstar unit among consumers, consumers may not utilize the Coinstar units in
sufficient numbers and frequency to make us profitable. In addition, the
increasing use of alternatives to coin and currency transactions such as
credit and debit cards, checks, wire transfers, smart cards and other forms of
electronic payment may adversely affect market acceptance and ongoing use of
the Coinstar service. If our coin-processing service does not achieve general
market acceptance among consumers or does so less rapidly than expected, our
business, financial condition and results of operations and ability to achieve
sufficient cash flow to service our indebtedness could be seriously harmed.
Our business is dependent on our retail partners, which are primarily
supermarket chains. Market acceptance of the Coinstar unit depends on the
willingness of potential retail partners to agree to installation and
retention of Coinstar units in their stores, primarily supermarkets. We
believe that market acceptance by potential retail partners will depend on our
ability to demonstrate the utility of the Coinstar unit as a customer service
and as a means to provide other tangible benefits to potential and existing
retail partners, including increased customer traffic and customer spending in
the form of voucher dollars in the store. If our service does not achieve
market acceptance, especially among supermarket chains, or does so less
rapidly than expected, our business, financial condition and results of
operations and ability to achieve sufficient cash flow to service our
indebtedness could be seriously harmed.
We generally have separate agreements with each of our retail partners,
providing for our exclusive right to provide coin processing services in
retail locations. Coinstar units in service in two supermarket chains, The
Kroger Co. and Safeway, Inc., accounted for approximately 32% and 11%,
respectively, of our revenue in 1999. (In May 1999, Kroger and Fred Meyer
merged to become The Kroger Co.). In the quarter ended September 30, 2000,
these two chains accounted for approximately 27% and 11%, respectively, of our
revenue. In addition, Albertson's, Inc. accounted for approximately 12% of our
revenue for the quarter ended September 30, 2000. The termination of any one
or more of our contracts with our retail partners could seriously harm our
business, financial condition, results of operations and ability to achieve
sufficient cash flow to service our indebtedness.
Our quarterly operating results may fluctuate due to different usage rates
of individual Coinstar units, seasonality of use and other factors. Customer
utilization of our coin processing service varies substantially from unit to
unit, making our revenue difficult to forecast. Customer utilization is
affected by the timing and success of promotions by us and our retail
partners, age of the installed unit, adverse weather conditions and other
factors, many of which are not in our control. We believe that coin processing
volumes are affected by seasonality; in particular, we believe that on a
relative basis, coin processing volumes have been lower in the months of
January, February, September and October. This trend mirrors the seasonality
patterns of our supermarket partners. We cannot be certain, however, that such
seasonal trends will continue. Any projections
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<PAGE>
of future trends in use are inherently uncertain due to a variety of factors,
including success in the timely deployment of a substantial number of
additional Coinstar units, consumer awareness and demand for our coin
processing services, and the lack of comparable companies engaged in the coin
processing business.
The timing and number of Coinstar units installed during the quarter affect
our quarterly operating results. The timing of Coinstar unit installations
during a particular quarter is largely dependent on installation schedules
determined by agreements with our retail partners, the variable length of
trial periods of our retail partners and the planned coordination of multiple
installations in a given geographic region.
As a result of these and other factors, revenue for any quarter is subject
to significant variation, and we believe that period-to-period comparisons of
our results of operations are not necessarily meaningful and should not be
relied upon as indications of future performance. Because our operating
expenses are based on anticipated revenue trends and because a large
percentage of our expenses are relatively fixed, revenue variability could
cause significant and disproportionate variations in operating results from
quarter to quarter and could result in significant losses. To the extent such
expenses precede, or are not followed by, increased revenue, our operating
results would be seriously harmed.
The success of our Meals.com subsidiary is uncertain. We have committed
significant resources and capital to develop and market the Meals.com products
and services including the Meals.com family of web-sites and the in-store
Shopper kiosk. The products and services offered by Meals.com are relatively
untested, and we cannot assure you that we will achieve market acceptance for
any such products and services. In addition, the in-store Shopper kiosk is in
early trials. Moreover, these and other new products and services may be
subject to significant competition with offerings by potential competitors in
addition to companies that compete in our coin processing business. Many of
these potential competitors have significantly greater technological expertise
and financial and other resources than we do. In addition, new products,
services and enhancements may pose a variety of technical challenges and
require us to enhance the capabilities of our network and attract additional
qualified employees. The failure to develop and market new products, services
or enhancements successfully could seriously harm our business, financial
condition and results of operations and ability to achieve sufficient cash
flow to service our indebtedness.
Control of our shares is concentrated with a relatively small number of
stockholders. A significant portion of our shares are controlled by a
relatively small number of stockholders. One such stockholder recently filed
with the Securities and Exchange Commission a Schedule 13D that stated that
the stockholder had been communicating with our Board of Directors, officers
and other stockholders regarding ways to enhance stockholder value, but that
such stockholder has no present plans or intentions to acquire or dispose of
any of our securities other than for the purpose of investment. There can be
no assurance, however, that such stockholder's intentions will not change in
the future or that other stockholders will not make a similar filing.
We have substantial indebtedness. As of September 30, 2000, we had
outstanding indebtedness of $62.2 million, which included $61.0 million of our
13.0% senior subordinated discount notes due 2006 and our capital lease
obligations. We paid our first semi-annual cash interest payment on the senior
notes on March 31, 2000. We will have debt service obligations of
approximately $7.9 million per year until October 2006, when the principal
amount of $61.0 million will be due. Our ability to meet our debt service
requirements will depend upon achieving significant and sustained growth in
our expected cash flow, which will be affected by our success in implementing
our business strategy, prevailing economic conditions and financial, business
and other factors, some of which are beyond our control. Accordingly, we
cannot be certain as to whether we will have sufficient resources to meet our
debt service obligations. If we are unable to generate sufficient cash flow to
service our indebtedness, we will have to reduce or delay planned capital
expenditures, sell assets, restructure or refinance our indebtedness or seek
additional equity capital. We cannot assure you that any of these strategies
can be effected on satisfactory terms, if at all, particularly in light of our
high levels of indebtedness. In addition, the extent to which we continue to
have substantial indebtedness could have significant consequences, including
our ability to obtain additional financing in the future for working capital,
capital expenditures, product research and
21
<PAGE>
development, acquisitions and other general corporate purposes may be
materially limited or impaired. A substantial portion of our cash flow from
operations may need to be dedicated to the payment of principal and interest
on our indebtedness and therefore not available to finance our business, and
our high degree of indebtedness may make us more vulnerable to economic
downturns, limit our ability to withstand competitive pressures or reduce our
flexibility in responding to changing business and economic conditions.
Our market is increasingly competitive. We are the first company to provide
a national network of self-service coin processing machines that provide a
fun, convenient, accurate and reliable means for consumers to convert loose
coins into cash. We compete regionally with several direct competitors that
operate self-service coin processing machines. We cannot be certain that these
competitors have not or will not substantially increase their installed units
and expand their service nationwide. We compete indirectly with manufacturers
of machines and devices that enable consumers to count or sort coins
themselves, and we also compete or may compete directly or indirectly with
banks and similar depository institutions for coin conversion customers. We
may also compete with supermarket retailers that decide to purchase and
service their own coin-counting equipment. We
believe banks are the primary alternative available to consumers for
converting coins into cash, and they generally do not charge a fee for
accepting rolled coins. As the market for coin processing develops, banks and
other businesses may decide to offer additional coin processing services,
either as a customer service or on a self-service basis, and compete directly
with us.
In addition, we may face new competition as we seek to expand into
international markets and develop new products, services and enhancements. Our
ability to expand internationally may subject us to competition with banks
that offer services competitive with ours and with manufacturers and other
companies that have established or are seeking to establish coin-counting
networks competitive with ours. Many of the competitors have greater
experience than we do in operating in these international markets. Moreover,
new products that we intend to develop, such as those involving the Internet,
may subject us to competition from companies with significantly greater
technological resources and experience.
Many of our potential competitors have longer operating histories, greater
name recognition, larger customer bases and significantly greater financial,
technical, marketing and public relations resources than we have. These
competitors may be able to undertake more extensive marketing campaigns, adopt
more aggressive pricing policies and make more attractive offers to consumers
and businesses. Our competitors might succeed in developing technologies,
products or services that are more effective, less costly or more widely used
than those that have been or are being developed by us or that would render
our technologies or products obsolete or noncompetitive. We cannot be certain
that we will be able to compete effectively with current or future
competitors. Competitive pressures could seriously harm our business,
financial condition and results of operations and our ability to achieve
sufficient cash flow to service our indebtedness.
Our failure to manage growth could harm our business. We have experienced
rapid growth and intend to continue to expand our operations aggressively. The
growth in the size and scale of our business has placed, and we expect it will
continue to place, significant demands on our operational, administrative and
financial personnel and operating systems. Our additional planned expansion
may further strain management and other resources. Our ability to manage
growth effectively will depend on our ability to improve our operating
systems, to expand, train and manage our employee base, to identify additional
manufacturing capacity and to develop additional service capacity. In
addition, we will be required to establish relationships with additional
third-party service providers. We may be unable to effectively manage the
expansion of our operations, to implement and develop our systems, procedures
or controls, to adequately support our operations or to achieve and manage the
currently projected installations. If we are unable to manage growth
effectively, our business, financial condition and results of operations and
our ability to achieve sufficient cash flow to service our indebtedness could
be seriously harmed.
We depend upon third-party manufacturers and service providers, and sole-
source manufacturers. We do not conduct manufacturing operations and depend,
and will continue to depend, on outside parties for the manufacture of the
Coinstar unit and its key components. We intend to continue to significantly
expand our
22
<PAGE>
installed base, and such expansion may be limited by the manufacturing
capacity of our third-party manufacturers and suppliers. Although we expect
that our current contract manufacturer, SeaMed (a division of Plexus
Corporation), will be able to produce sufficient units to meet projected
demand, SeaMed or other manufacturers in reality may not be able to meet our
manufacturing needs in a satisfactory and timely manner. If there is an
unanticipated increase in demand for Coinstar unit installations, we may be
unable to meet such demand due to manufacturing constraints.
Although we have a contract with SeaMed, SeaMed does not have an obligation
to continue manufacturing the Coinstar unit or its components. In July 1999,
SeaMed merged with Plexus Corp. of Neenah, Wisconsin. SeaMed's management has
assured us that the combined entity will continue to meet our manufacturing
needs. However, we cannot be certain that Plexus will continue to operate in
Redmond, Washington or continue to meet our manufacturing needs.
In addition, we obtain some key hardware components used in the Coinstar
units from sole-source suppliers. We cannot be certain that we will be able to
continue to obtain an adequate supply of these components in a timely manner
or, if necessary, from alternative sources. If we are unable to obtain
sufficient quantities of components or to locate alternative sources of supply
on a timely basis, we may experience delays in installing or maintaining
Coinstar units, either of which could seriously harm our business, financial
condition and results of operations and ability to achieve sufficient cash
flow to service our indebtedness.
We rely on third-party service providers for substantial support and service
efforts that we currently do not provide directly. In particular, we contract
with armored carriers and other third party providers to arrange for pick-up,
processing and deposit of coins. We generally contract with one transportation
provider and coin processor to service a particular region. Many of these
service providers do not have long-standing relationships with us and either
party generally can terminate our contracts with them with advance notice
ranging from 30 to 90 days. We do not currently have nor do we expect to have
in the foreseeable future the internal capability to provide back up service
in the event of sudden disruption in service from an armored carrier company.
Any failure by us to maintain our existing relationships or to establish new
relationships on a timely basis or on acceptable terms would harm our
business, financial condition and results of operations and our ability to
achieve sufficient cash flow to service our indebtedness.
Moreover, as with any business that handles large volumes of cash, we are
susceptible to theft, counterfeit and other forms of fraud, including security
breaches of our computing system that performs important accounting functions.
We cannot be certain that we will be successful in developing product
enhancements and new services to thwart such activities.
We may be unable to adequately protect or enforce our patents and
proprietary rights. Our future success depends, in part, on our ability to
protect our intellectual property and maintain the proprietary nature of our
technology through a combination of patents, licenses and other intellectual
property arrangements, without infringing the proprietary rights of third
parties. We have 14 United States patents and 3 International patents relevant
to aspects of self-service coin processing. We also have additional patents
pending in the United States and several foreign jurisdictions.
We cannot assure you that any of our patents will be held valid if
challenged, that any pending patent applications will issue, or that other
parties will not claim rights in or ownership of our patents and other
proprietary rights. Moreover, patents issued to us may be circumvented or fail
to provide adequate protection. Our competitors might independently develop or
patent technologies that are substantially equivalent or superior to our
technologies.
Since patent applications in the United States are not publicly disclosed
until the patent is issued, others may have filed applications, which, if
issued as patents, could cover our products. We cannot be certain that others
will not assert patent infringement claims or claims of misappropriation
against us based on current or pending United States and/or foreign patents,
copyrights or trade secrets or that such claims will not be
23
<PAGE>
successful. In addition, defending our company and our retail partners against
these types of claims, regardless of their merits, could require us to incur
substantial costs and divert the attention of key personnel. Parties making
these types of claims may be able to obtain injunctive or other equitable
relief which could effectively block our ability to provide our coin
processing service and use our processing equipment in the United States and
abroad, and could result in an award of substantial damages. In the event of a
successful claim of infringement, we may need or be required to obtain one or
more licenses from, as well as grant one or more licenses to, others. We
cannot assure you that we could obtain necessary licenses from others at a
reasonable cost or at all.
We also rely on trade secrets to develop and maintain our competitive
position. Although we protect our proprietary technology in part by
confidentiality agreements with our employees, consultants and corporate
partners, we cannot assure you that these agreements will not be breached,
that we will have adequate remedies for any breach or that our trade secrets
will not otherwise become known or be discovered independently by our
competitors. The failure to protect our intellectual property rights
effectively or to avoid infringing the intellectual property rights of others
could seriously harm our business, financial condition and results of
operations and ability to achieve sufficient cash flow to service our
indebtedness.
There are many risks associated with doing business in international
markets. We intend to increase our deployment of Coinstar units in select
international markets. We have only recently begun to expand our business
internationally in the United Kingdom and Canada and, accordingly, have
limited experience in operating in international markets. We anticipate that
our international operations will become increasingly significant to our
business. International transactions pose a number of risks, including failure
of customer acceptance, risks of regulatory delays or disapprovals with
respect to our products and services, and competition from potential and
current coin-counting businesses. Exposure to exchange rate risks,
restrictions on the repatriation of funds, political instability, adverse
changes in tax, tariff and trade regulations, difficulties with foreign
distributors, difficulties in managing an organization spread over several
countries, and weaker legal protection for intellectual property rights. These
risks could seriously harm our business, financial condition, and results of
operations and ability to achieve sufficient cash flow to service our
indebtedness.
Expansion into Europe and other countries, if undertaken, will present
challenges different from those faced in the United States. We expect to face
greater competition than currently is the case in the United States because
banks in Europe and other countries typically offer coin-counting services to
their customers and most of the world's self-service coin-counting machine
manufacturers are located in Europe. Some of these manufacturers have been
involved in attempts to set up networks similar to ours. In addition, local
laws and market conditions may require us to change our fee structure. We also
will face a number of technical challenges as we attempt to expand into Europe
and other countries. In several areas, close national borders may require that
our units be able to handle as many as nine different national coin sets, as
well as the new Euro coin. Supermarkets in Europe in particular tend to be
smaller than those in the United States. Because of this, floor space is more
of an issue than in the typical supermarket in the United States. As a result,
it may be necessary for us to reduce the size of our unit to succeed in Europe
and other countries. Reducing our unit size could present technical challenges
and the smaller capacity that might result from a smaller unit could increase
operating costs in servicing the units. Many local laws do not permit stores
to be operated on a 24-hour, seven-day per week basis. This could reduce
volumes and present challenges in our servicing of the units. We also expect
to face higher telecommunications costs in Europe and other countries than in
the United States, and a foreign network may need to make extensive use of
cellular communications.
Defects in or failures of our operating system could harm our business. We
collect financial and operating data, and monitor performance of Coinstar
units, through a wide-area communications network connecting each of the
Coinstar units with a central computing system at our headquarters. This
information is used to track the flow of coins, verify coin counts and
schedule the dispatch unit service and coin pick-up. The operation of Coinstar
units depends on sophisticated software, computing systems and communication
services that may contain undetected errors or may be subject to failures.
These errors may arise particularly when new services or service enhancements
are added or when the volume of services provided increases. Although each
Coinstar unit
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<PAGE>
is designed to store all data collected, thereby helping to ensure that
critical data is not lost due to an operating systems failure, our inability
to collect the data from our Coinstar units could lead to a delay in
processing coins and crediting the accounts of our retail partners for
vouchers already redeemed. The design of the operating systems to prevent loss
of data may not operate as intended. Any loss or delay in collecting coin
processing data would seriously harm our operations.
We have in the past experienced limited delays and disruptions resulting
from upgrading or improving our operating systems. Although such disruptions
have not had a material effect on our operations, future upgrades or
improvements could result in delays or disruptions that would seriously harm
our operations.
We rely on the long distance telecommunication network which is not owned by
us and is subject to service disruptions. Further, while we have taken
significant steps to protect the security of our network, any breach of
security whether intentional or from a computer virus could seriously harm us.
Any service disruptions, either due to errors or delays in our software or
computing systems or interruptions or breaches in the communications network,
or security breaches of the system, could seriously harm our business,
financial condition and results of operations and ability to achieve
sufficient cash flow to service our indebtedness.
We must keep pace with rapid technological changes to remain
competitive. The self-service coin processing market is relatively new and
evolving. We anticipate that, as the market matures, it will be subject to
technological change, new services and product enhancements, particularly as
we expand our service offerings. Accordingly, our success may depend in part
upon our ability to keep pace with continuing changes in technology and
consumer preferences while remaining price competitive. Our failure to develop
technological improvements or to adapt our products and services to
technological change on a timely basis could, over time, seriously harm our
business, financial condition and results of operations and our ability to
achieve sufficient cash flow to service our indebtedness.
Some anti-takeover provisions may affect the price of our common
stock. Provisions of our certificate of incorporation, bylaws and rights plan
and of Delaware law could make it more difficult for a third party to acquire
us, even if doing so would be beneficial to our stockholders.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are subject to the risk of fluctuating interest rates in the normal
course of business. The relationship between fixed and floating rate debt
varies depending on market conditions. We do not enter into speculative
derivative transactions or leveraged swap agreements.
The table below presents principal (or notional) amounts and related
weighted average interest rates outstanding at each of the respective balance
sheet dates. All items described in the table are non-trading and are stated
in U.S. dollars.
<TABLE>
<CAPTION>
Nine Months
Ended Year Ended December 31,
September 30, -------------------------------------------------------
Interest Rate Risk 2000 2000 2001 2002 2003 2004 Thereafter
------------------ ------------- ------- ------- ------- ------- ------- ----------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Capital lease
obligations............ $ 1,594 $ 1,387 $ 625 $ 98 -- -- --
Average interest rate... 10.37% 10.37% 10.37% 10.91% -- -- --
Fixed long-term debt.... 60,980 $60,980 $60,980 $60,980 $60,980 $60,980 $60,980
Average interest rate... 13.0% 13.0% 13.0% 13.0% 13.0% 13.0% 13.0%
Variable senior
revolving debt......... $ 500 $ 500 $ 500 $ 500 $ 500 $ 500 $ 500
Average interest
rate(*)................ 10.3% 10.3% 10.3% 10.3% 10.3% 10.3% 10.3%
</TABLE>
--------
* As of June 30, 2000, the interest rate decreased from Imperial Bank's prime
rate plus 200 basis points to its prime rate plus 50 basis points due to our
performance with respect to certain financial ratios.
25
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------- -----------------------
<S> <C>
4.1(1) Senior Secured Note dated February 10, 2000, executed by Meals.com, Inc. on
behalf of Coinstar, Inc.
4.2 Fifth Amendment to Credit Agreement between Coinstar, Inc. and Imperial Bank,
dated September 26, 2000.
27.1 Financial Data Schedule.
</TABLE>
--------
(1) Incorporated by reference to the Registrant's Current Report on Form 8-K
(file number 000-22555) filed by the Registrant on February 18, 2000.
(b) Reports on Form 8-K:
None
26
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Coinstar, Inc.
(registrant)
/s/ Diane L. Renihan
By: _________________________________
Diane L. Renihan
Chief Financial Officer
November 14, 2000
27
<PAGE>
Exhibit Index
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------- -----------------------
<C> <S>
4.1(1) Senior Secured Note dated February 10, 2000, executed by Meals.com,
Inc. on behalf of Coinstar, Inc.
4.2 Fifth Amendment to Credit Agreement between Coinstar, Inc. and
Imperial Bank, dated September 26, 2000.
27.1 Financial Data Schedule.
</TABLE>
--------
(1) Incorporated by reference to the Registrant's Current Report on Form 8-K
(file number 000-22555) filed by the Registrant on February 18, 2000.
(b) Reports on Form 8-K:
None
28
